Library  of  the 
University  of  North  Carolina 

Endowed  by  the  Dialectic  and  Philan- 
thropic Societies 

UNIVERSITY  OF  NX.  AT  CHAPEL  HILL 


Cf>'5&A-(j)j&ur 


r*    "?. 


FOR  USE  ONLY  IN 
THE  NORTH  CAROLINA  COLLECTION 


THIS  TITLE  HAS  BEEN  MICROFILMED 


TO  THE  DELEGATES  OP  THE  CON- 
STITUTIONAL CONVENTION. 


I 


The  Wilmington,  Charlotte  and   Rutherford    Rail    Road 
is  completed  and  in  running  order  a  distance  of  148   miles. 

It  is  graded  and   substantially  ready  for  the  superstruc- 
ture a  distance  of  some  50  miles  further. 

It  has  cost,  in  gold,  or  at  ante-war  prices,  $3,600,000 

It  would  cost  to-day,  in  currency,  6,000,000 

This  $3,600,000  used  in  the   construction  and  equipment 
of  the  Road  was  obtained  as  follows : 
Amount  loaned  to  the  Company  by    the  State  of   North 

Carolina :  $2,000,000 

Amount  paid  on  subscriptions  to  Capital  Stock,       1,200.000 
Amount  borrowed  since  the  war,  constituting 

its  present  floating  debt,  400,000 


Total  $3,600,000 

The  $2,000,000  received  from  the  State  was  not  a  donation, 
nor  a  subscription,  but  a  strict  loan. 

The  State  declined  to  aid  this  Company,  as  she  had  aided 
the  other  Rail  Road  enterprises  of  the  State,  by  a  subscrip- 
tion to  its  capital  stock,  and  consented  only  to  make  a  loan 
to  the  Company  by  giving  the  Company  the  bonds  of  the 
State,  and  taking  from  the  Company  in  exchange  an  equiva- 
lent amount  of  the  Bonds  of  the  Company,  secured  by  a 
mortgage  upon  the  entire  property  and  franchise  of  the 
Road.  In  pursuance  of  this  contract,  ratified  by  various  acts 
of  the  General  Assembly,  the  State  gave  the  Company 
$2,000,000  State  Bonds,  which  were  sold  and  the  proceeds 
expended  upon  the  Road,   and  the  State  received  in  return 


i"** 


$2,000,000  of  the  Bonds  of  the  Company,  secured  by  mort- 
gage upon  the  Road  and  its  entire  property. 

Soon  after  the  close  of  the  war  the  Company  was  obliged 
to  incur  a  floating  debt  to   replace   the  equipment,  rolling- 
stock,  bridges,  &c,  which   had  been   destroyed  by  both  the 
Federal  and  Confederate  forces,  just  preceding  the  close  of 
hostilities. 

To  enable  the  Company  to  pay  this  debt  and  to  fur- 
nish the  means  for  completing  the  Road  from  Wilmington  to 
a  junction  with  the  Western  North  Carolina  Road,  now  in 
process  of  construction  to  Ducktown,  in  Tennessee,  the 
State,  by  Act  of  General  Assembly,  ratified  December  2  0th., 
1866,  waived  the  priority  of  its  mortgage,  and  permitted  the 
Company  to  place  upon  its  entire  Road,  built  and  to  be  built 
(272  miles  in  length.)  a  first  mortgage  of  $4,000,000,  the  State 
reserving  to  itself  "the  rights  of  a  second  mortgage  only." 

This  first  mortgage  was  executed,  recorded  and  delivered, 
to  Le Grand  Lockwood,  Joseph  Stuart,  and  Philo.  C.  Cal- 
houn, Trustees,  of  the  City  of  New  York,  and  Bonds  secured 
by  this  mortgage  were  issued  in  accordance  Avithits  provis- 
ions. s 

At  the  time  this  mortgage  was  executed,  it  was  supposed 
that  these  Bonds  could  be  negotiated  affair  rates,  and  means 
be  thus  furnished  to  the  Company  for  paying  its  debt  and 
prosecuting  its  work.  But  the  distrust  which  prevails 
against  all  Southern  securities,  and  the  anomalous  position 
of  North  Carolina,  financial  and  political,  has  rendered  it  im- 
possible to  negotiate  the  Bonds,  either  at  the  North  or  in 
Europe,  at  any  price  which  the  Company  could  afford  to 
accept.  All  the  Bonds,  therefore,  secured  by  this  first  mort- 
gage of  $4,000,000, are  in  the  hands  of  the  Company,  except 
such  as  are  hypothecated  for  its  floating  dept. 

But,  about  $1,200,000  of  these  Bonds  are  hypothecated  for 
this  floating  debt  of  $300,000,  and  the  creditors  have  already 
notified  the  Company  that  they  cannot  extend  the  loans 
when  they  fall  due.     Some  small  amounts  have  already  ma  - 


#as 


tured,  other  will  mature  shortly,  and  almost  the  entire 
amount  will  mature  before  a  new  Legislrture  can  possibly  as- 
semble under  the  Constitution  to  be  framed  by  this  Conven- 
tion. When  these  loans  shall  mature,  the  collaterals  which 
are  deposited  for  their  security  will  be  sold  m  the  market, 
according  to  law  and  custom.  The  Company  cannot  bid  for 
them,  because,  if  they  had  the  money  to  buy  the  collaterals, 
they  would  have  the  money  to  pay  the  debt.  The  public,  at 
large,  will  not  buy  them  then,  for  they  will  not  buy  them  now  : 
and  so,  they  will  be  bought  by  the  creditors  of  the  Compa- 
ny at  such  prices  as  they  may  choose  to  pay.  In  this  way, 
perfectly  legitimately,  those  1,200.000  dollars  of  Bonds  may 
become  the  property  of  the  creditors  of  the  Company  in 
payment  of  a  debt  of  $300,000.  Without  some  relief,  there- 
fore, these  $1,200,000  first  mortgage  Bonds  are  in  danger  of 
being  sacrificed  :  and,  in  the  event  of  a  subsequent  foreclo- 
sure in  the  Federal  Courts,  the  State  would  be  compelled  to 
lose  its  entire  interest  of  $2,000,000,  in  the  Road,  to  pro- 
tect it  by  redeeming  these  $1,200,000  of  Bonds  at  their  par 
value. 

This  result  has  been  produced  by  the  condition  of  the 
times,  which  has  embarrassed  all  of  the  corporations,  as  well 
as  the  citizens,  and  the  State  of  North  Carolina.  To  avoid 
it,  the  Company  asks  the  State  to  endorse  $1,000,000  of  its 
first  mortgage  Bonds,  and,  as  an  equivalent  for  this,  the 
Company  proposes  to  reduce  this  first  mortgage  from 
$4,000,000  to  $2,500,000,  leaving  the  latter  amount  only  be. 
fore  the  second  mortgage  of  the  State  instead  of  the  whole 
$4,000,000  as  at  present. 

The  Company  does  not  ask  the  State  to  incur  any  increase 
of  indebtedness  by  a  further  issue  of  Bonds.  It  only  asks 
for  the  credit  of  the  State  in  the  endorsement  of  $1,000,000 
of  its  Bonds. 

The  State  is  simply  asked  to  lend  its  credit  in  an  indorse- 
ment where  there  is  no  rational  probability,  or  scarcely  pos- 
sibility, that  it  will  ever  hear  from  it  again,  for  the  nett  earn- 


ings  of  the  Road,  in  its  present  unfinished  coudition,  and  for 
the  past  unprecedentedly  disastrous  year,  were  much  more 
than  sufficient  to  pay  the  interest  upon  the  $1,000,000  Bonds 
which  it  asks  the  State  to  endorse. 

On  the  other  hand,  by  so  lending  its  credit,  the  State  can- 
cels $1,500,000,  of  the  mortgage  standing  before  its  own  ; 
it  saves  the  $2,000,000  which  it  has  in  the  Boad  from  sacri- 
fice ;  it  saves  the  $1,200,000  capital  stock  contributed  and 
paid  by  the  people  of  North  Carolina  ;  and  it  enables  the 
Company,  in  the  prosecution  of  its  woik,  to  scatter  some 
half  million  dollars  among  the  people  of   North   Carolina. 

Now  the  important  question  to  be  considered  is  this  : — 
What  is  the  interest  of  the  State  in  this  Eoad  worth  ?  Is  it 
worth  saving  ?  Has  it  been  of  any  value,  or  is  it  likely  to 
be? 

The  answer  to  this  question  is  that  the  Company  has  al- 
ready paid  the  State  for  interest  on  this  loan  of  $2,000,000 
the  sum  of  $774,250.  According  to  the  report  of  the  Public 
Treasurer,  it  has  paid  the  entire  amount  which  has  accrued 
for  interest  on  this  loan  from  the  date  of  the  issue,  under  the 
act  of  1858,  down  to  October  1,  1867,  except  $187,500,  and 
against  this  default  of  interest  the  Company  has  [an  equita- 
ble offset  of  $156,000,  for  iron,  which  the  Company  had 
bought  and  paid  for,  but  which  was  seized  by  authority  of 
the  State  during  the  war,  against  the  protest  of  the  Com- 
pany, and  which  was  used  in  repairing  other  roads,  and  for 
Avhich  the  Company  has  never  received  a  dollar. 

It  will  thus  be  seen  that  the  Company  continued  to  pay 
interest  to  the  State  long  after  the  State  defaulted  in  the 
payment  of  interest  on  the  Public  debt.  In  fact  the  Com- 
pany has  paid  the  State  for  interest  on  its  loan  over  $500,000 
more  than  the  State  has  paid  in  interest  'upon  the  Bonds 
which  it  gave  the  Company.  It  is  true  this  unpaid  interest 
on  the  State  Bonds  remains  as  a  debt  against  the  State: — 
But  had  the  State  continued  to  pay  its  interest  as  the  Boad 
did,  the  interest  now  overdue,  and  unpaid  on   the  Public 


• 
debt,  would  be  reduced  to  a  small  and  easily  manageable 
sum,  and  the  Company  would  not  then  have  been  reduced  to 
its  present  embarrassed  condition,  for,  Avith  the  Public  Faith 
intact,  there  would  have  been  no  difficulty  in  negotiating  the 
Company's  Bonds. 

On  the  other  hand,  if  the  Company  had  not  been  obliged 
to  pay  this  interest  to  the  State,  but  could  have  had  it  to 
expend  upon  the  construction  of  the  Road  ;  in  other  words, 
had  the  money  received  from  the  State  been  a  subscription 
to  the  Capital  Stock,  as  was  the  case  to  all  the  other  Boads, 
instead' of  a  loan,' the  road  would  now  be,  not  only  unbur- 
dened with  debt,  but  would  have  been  constructed  nearly  or 
quite  to  Charlotte. 

It  will  thus  be  seen  that  the  State  has  already  received 
from  its  loan  to  this  Company  more  than  three-fourths  of  a 
million  dollars.  There  can  be  no  rational  doubt  that  the  in- 
terest will  be  as  promptly  paid  in  the  future,  as  soon  as  the 
industrial  prosperity  of  the  State  is  restored.  Can  it  then 
be  a  question  whether  this  loan  of  $2,000,000  be  worth 
saving  ? 

This  brief  statement  of  facts  the  President  of  the  Compa: 
ny  has  felt  it  his  duty  to  lay  before  the  Convention,  and  to 
submit  to  their  action  the  Ordinance  which  has  been  report- 
ed by  the  Committee. 

Had  it  been  an  ordinary  case  of  legislation  which  could 
have  awaited  the  assembling  of  the  Legislature,  he  would 
not  have  intruded  it  upon  the  attention  of  this  Convention. 
But  the  danger  was  such,  and  the  exigency  so  great,  that  he 
did  not  feel  at  liberty  to  withhold  from  the  knowledge  of  the 
Convention  the  facts  above  stated,  and,  with  this  statement, 
he  respectfully  submits  the  decision  and  the  responsibility  of 
the  subject  to  the  wisdom  and  discretion  of  this  body,*  and 
whatever  may  be  their  action,  he  will  receive  it  in  the'con- 
sciousness  of  having  discharged  his  full  duty,  to  them  and  to 
the  State,  and  to  the  Corporation  he  represents,  and  in  the 


full  belief  that  this  Convention  will  take  such  action  as  an 
enlightened  patriotism,  and  an  honest  conviction  of  duty, 
shall  seem  of  them  to  require. 


Note.  A  proper  enquiry  has  been  made  as  to  whether  the  $3,600,000,  used  in 
the  construction  of  theW.  C.  &  R.  R.  R.,  has  been  economically  expended.  This 
question,  we  think,  can  be  most  satisfactorily  answered. 

Of  the  $3,600,000,  the  sum  of  $450,000  has  been  expended  in  grading,  &c,  upon 
that  part  of  the  Road  still  unfinished.  Add  to  this  the  $350,000  expended  to  re- 
pair the  damage  and  destruction  caused  by  the  war,  and  we  have  the  sum  of 
$800,000,  This  deducted  from  the  $3,600,000  leaves  the  cost  of  the  148  miles 
completed  to  be  $2,800,000,  or  less  than  $19  000  per  mile. 

How  does  this  compare  with  the  cost  at  which  other  Rail  Roads  have  been 
constructed? 

By  the  published  report  of  the  Director  of  the  Bureau  of  Public  Statistics  at 
Washington,  brought  down  to  the  close  of  the  year  1867,  we  find,  in  the  round 
numbers,  the  average  cost  per  mile  of  the  Rail  Roads  of  different  States  to  be  an 
follows : 

New  England  States, over  $40,000 

New  York, nearly   50,000 

Pennsylvania,  over   50,000 

Illinois. 45,000 

Ohio, 42,000 

Virginia, 30,000 

Tennessee, 35,000 

Mississippi, 27,000 

Georgia, 22,000 

South  Carolina, 26,000 

Average  cost  of  all  the  Rail  Roads  in  the  United  States  is  nearly 40,000 

The  Western  States  U.  S.  Government  Grants  to  the  Pacific  Rail  Road, 

for  the  section  crossing  the  plains, $16,000  per  mile. 

To  another  section,  34,000    "      " 

To       •'.  '•         48,000    "      " 

To        "  "        56,000    "     " 

besides  the  alternate  sections  of  land  through  which  it  passes.  &  Yet  the  W.  C. 
&  R.  Rail  Road,  including  real  estate,  depot  buildings,  warehouses  and  equip- 
ments of  all  kinds,  has  cost  less  than  $19,000  per  mile. 


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